Are You Enjoying Tax Benefits U/S 24, 80C, 80EE On Your Home Loan?

Updated on: 17 Jan 2024 // 3 min read // Home Loans
Author :(534 posts)

Do you know that having a Home Loan can help you save taxes? Read on to know all about the various home loan tax benefits and eligibility criteria for gaining these deductions.Knowing about tax rules and deductions can help you save taxes and prosper in the long run.

Repayment of the Home loan:

The tax benefit that you will enjoy on the Home Loan depends on how you will be repaying this loan. As you are already aware, your Home Loan EMI has two parts–

  1. Principal Amount
  2. Interest on the Home loan

You can claim the deduction of both parts separately.

Section 80C – Tax benefit on Home loan (Principal Amount)

The amount that is being paid by someone as repayment of the principal amount qualifies for tax benefit under the section 80C. This is also applicable to the registration fee that is paid one time when the home is being purchased.

Maximum Tax deduction: Under 80C, the maximum tax deduction that is allowed is up to Rs. 150,000.

The amount can be invested in: Senior Citizens’ Saving Schemes, Equity oriented mutual funds, National Savings Certificate, PPF or even Tax Saving Fixed Deposits.

Apply for best home loan online

Conditions for receiving the tax deductions:

  • The tax benefit and the deductions are applicable once the construction of the home is complete.
  • Completion Certificate (provided by the builders) must be furnished at the time of submitting the tax deduction proofs
  • If you are buying an under construction property (owing to the fact that this is cheaper than the one that is already completed), there will also be GST levied on your purchase. A property that has already been constructed will not incur any service tax.
  • The property that is being considered for tax deductions under 80C should not be sold within five years from the end of the Financial Year (during which the property has been bought by the owner)

For repayment of the interest amount, you may be eligible for the following home loan tax benefits

Section 24 and Section 80EE

Section 24 – Tax Benefit on Home loan (Interest Amount)

Under Section 24, the income from the property shall be reduced by the interest paid on loan. Here, the loan has to be taken for the purpose of either the purchase of the property, further construction of the property, repair works, renewal or reconstruction.

Maximum Tax Deduction – Under Section 24, the maximum tax deduction that is allowed is up to Rs. 2 lakhs (This amount was increased from Rs. 1.5 lakhs during the 2014 Budget).

 Note: In case the property is not self-occupied, there is no maximum limit of tax deduction and the owner can claim the benefit for the entire interest amount.

Conditions for receiving the tax deductions –

  • The tax deduction is deductive on a payable basis and can be claimed even if no payment has been done during that year (This is one difference from 80EE)
  • If the property is not constructed or acquired within 5 years from the end of the financial year, then the eligibility for the tax deduction will reduce from Rs. 2 lakhs to Rs. 30,000
  • The tax deduction will not be allowed if the property is under construction
  • This tax deduction is only applicable for the person who has acquired the property, and the successor cannot claim this tax benefit.

Section 80EE – Tax benefit on Home loan (Interest Amount)

This tax deduction is only meant for individuals who are purchasing a property, and it is not applicable for small business owners or company owners or any other kind of taxpayer.

Maximum Tax Deduction: The tax deduction is over and above Rs. 2 lakh limit that is provided in section 24 of the Income Tax Act.

Conditions for receiving the tax deductions –

  • To claim this deduction, you must not own any other property, and this must be the first property.
  • Your loan must be sanctioned by a financial institution.
  • The value of your property must be at least Rs. 50 lakhs or less than that.
  • The loan that has been taken should be less than Rs. 35 lakhs.
  • It is not specified whether you should be a resident of this property to be eligible for the tax benefit, hence you can claim the tax under both the conditions.
  • You can also be a joint owner of the property for claiming the benefit. For instance, if you are a couple and both partners are paying instalments of the property, then both are eligible for this deduction.

Getting the benefits of Section 24 and Section 80EE:

Now that you are familiar with the two different tax deductions that are applicable to the repayment of Home Loan, you can check the eligibility criteria and see if you qualify for a loan.